Search the site:

Copyright 2010 - 2024 @ DevriX - All rights reserved.

Pricing and Licensing Models: A Guide to B2B Products

Pricing and Licensing Models_ A Guide to B2B Products

Every business needs some kind of software. Of course, this means that every niche also has its own set of competing software that others can choose from. How do you decide which software to use, then?

Sometimes, it boils down to factors like the features being offered, ease of use, level of customer support, etc. Sometimes, however, the deciding element is the pricing model.

How about payment? Do you need to pay for everything at once? Or can you pay in smaller installments over a longer period of time? What type of access do you get in return? Are there any updates included in the price?

Today, in particular, we will be focusing on the ongoing debate of perpetual vs subscription, to establish which one is better.

Readers Also Enjoy: What Is Captive Product Pricing and Does It Work? – DevriX

What Is a Perpetual License?

Perpetual licensing is, at its core, a one-time purchase, meaning that you buy the software, and it is yours to use forever. You will not have to pay any renewal fees, however, that does not necessarily include software updates and customer support.

Let’s take a look at an example. Take video games. You buy the game, and you can play for as long as you want, but when a DLC, which is a game expansion, comes out, you need to buy it to get access to that additional game content.

In terms of software, perpetual licensing has its serious disadvantages. Of course, a single payment means that the tool is a lot more expensive, and the buyer’s remorse is a lot bigger.

A person starts doubting whether they have made the right decision to spend $500, for example, for a tool. Sure, they have a lifetime of access to said tool, but the initial cost discourages a lot of users.

Readers Also Enjoy: B2B SEO: A Business Guide – DevriX

What Is a Subscription Model?

With a subscription license, you need to pay for the software periodically, whether that be on a yearly or monthly basis. However, when you don’t need the software anymore, you can simply stop paying for it, and the software is no longer available to use.

The price is a lot lower, compared to the perpetual marketing agency pricing model, which makes the software accessible to more users. You also get access to all the latest upgrades, without having to pay an additional fee.

Let’s compare it to video games again. Services like PlayStation + or Xbox Game Pass grant you access to a library of games for a fee of $9.99 a month.

You don’t need to purchase the games, which would be much more expensive. Instead, you subscribe and play them, with no strings attached.

This is much more appealing to people since paying $10 or $15 a month is not that big of a commitment, and if you are not satisfied with the software/service, you can just stop paying for it.

Perpetual License: Pros & Cons

Perpetual License_ Pros & Cons

Pros:

  • Ownership. A big advantage for users is the fact that they own the software. They don’t need to worry about it expiring and having to renew it.
  • No ongoing costs. Users pay once and that’s it, no other costs are involved – just like buying a book.

Cons:

  • No updates. The software can become really outdated, especially if a lot of new improvements are made in the field. Users may need to switch to other software or upgrade on their current plan, to keep up with changes.
  • High upfront cost. The initial cost can be quite high, turning it into a barrier for many users.

Readers Also Enjoy: How Lead Tracking Software Might Boost Your Business – DevriX

Subscription License: Pros & Cons

Subscription License_ Pros & Cons

Pros:

  • Scalability. Growing businesses can benefit from the flexibility of subscription-based pricing, since they can decide whether to upgrade their plan. Additionally, they can pay month by month or cancel altogether if they need to.
  • Regular updates. Users get access to the latest features and security updates, ensuring they can use the full capabilities of the software.

Cons:

  • Ongoing costs. A subscription model means that even the best b2b companies and businesses need to take the ongoing costs into account. They have to pay for the software every month or every year, which can get a bit expensive in the long run.
  • Dependency. Your access to the tool is closely related to your subscription. This makes you more or less dependent on the software. If you fail to renew or if the service is discontinued, you will lose your access to the tool and will have to look for an alternative.

Readers Also Enjoy: Transactional Email: Basic Guide for Maximum Results – DevriX

Perpetual License vs Subscription: What Should You Go For?

One of the main differences in the subscription vs perpetual discussion is the ongoing relationship between the customer and the company that provides the software. You see, when a user gets lifetime access to the tool, they kind of become self-sufficient, and don’t really need to interact with the company anymore.

On the other hand, paying for a tool on a month-to-month basis means that users are much more engaged and involved in the development of the company, updates to the software, customer support assistance, and so on.

Moreover, if your data sources include specialized providers such as a B2B demand gen agency, this engagement becomes even more critical. Believe it or not, this approach is also way better for user satisfaction and is by far more attractive to most. It may be common psychology, but customers prefer to pay $20 every month instead of paying $250 at once.

They find it much more affordable and with fewer strings attached.

As a company, this gives you a much more steady revenue stream, as you know that you will have that income on a regular basis. It also helps you to develop long-term relationships with your customers.

On the other hand, a perpetual licensing model requires you to constantly attract and convert new customers, if you want to have revenue.

Additionally, you don’t really gain much from developing customer relationships, since you only get paid once, and clients don’t need you afterward.

Final Words

In the battle of perpetual vs subscription, the latter is undoubtedly the winner. More and more companies will likely make the switch from perpetual licensing to a subscription-based pricing model.

Just take a look at some of the most popular services like Netflix and Spotify – why do you think they both use a subscription-based pricing model, instead of a perpetual subscription?

That’s right, subscriptions mean higher customer engagement, a streamlined revenue model, and lower customer acquisition costs.

Did you know that the WordPress Retainer Plans of DevriX work similarly? You select your plan with various hours of work per month, and we start working on your website.

On top of that, we also offer monthly maintenance plans and digital marketing services, so whatever your business needs – we got you covered!